The sheer size has perhaps not been comprehended. Why else would a market
that’s larger in potential than the entire IT industry size just sit around
silently, waiting to be tapped?
A remote village in Gujarat. Farmers deliver their share of milk to a milk
collection center nearby. For a good three to four hours every day, they haggle
with the officials at the collection center on the quality and exact quantity of
the milk delivered. Given the cumbersome calculations involved, payments came in
only after 10 days. And even then, the farmers are not sure about the
reliability of these estimates.
Fast forward to the 22nd century. The farmer flashes his plastic card at the
counter. It is read electronically and the identification number transmitted to
a personal computer. The milk is weighed and the accurate result displayed by
the PC.
Next on the agenda is sampling and the fat content is determined in just a
few seconds. The fat content is displayed to the farmer and communicated to the
PC. The computer calculates the amount due to the farmer on the basis of a rate
chart that indicates the price for milk with different levels of fat content.
The total value of the milk is then printed out on a payment slip and given to
the farmer, who collects the payment at an adjoining window. Total time required
for the transaction–30 seconds.
A farmer in Bagadi village in the Dhar district of MP logs on at the
neighborhood information kiosk to check the prevailing market rates for
potatoes. He finds that at the Indore Auction Center, potatoes are being traded
at Rs 400 per quintal compared to the Rs 300 per quintal being offered by the
local trader. He hops on to a truck and makes Rs 4000 more for his 10-quintal
potato crop.
Kal Singh from Gunawad village in Madhya Pradesh refuses to
compromise on the price of his Jersey cow. He advertises his cow on a
net-enabled software called Gram Haat (village market) from a nearby kiosk. His
message is posted to about 32 other villages in the vicinity and after some
e-haggling, he gets a buyer from Dilwara village.
India |
|||||
 | Total numbers |
Systems needed Units |
Revenue Value (Rs crore) |
Revenue (Rs per annum) |
 Total Revenue (Rs crore) |
Villages | 579,688 | 289,844 | 1,594 | 42,000 | 1,217 |
Towns | 5,161 | 1,290,250 | 7,096 | 54,000 | 6,967 |
Districts | 593 | 296,500 | 1,631 | 72,000 | 2,135 |
Post offices |
1,544,551 | 1,544,551 | 8,495 | 12,000 | 1,853 |
NGOs | 300,000 | 50,000 | 275 | 3,000 | 90 |
Education | 945,775 | 3,310,213 | 18,206 | 12,000 | 3,972 |
RWA’s | 500,000 | 5,000 | 28 | 1,800 | 90 |
Police stations |
12,174 | 12,174 | 67 | — | — |
Other IT component |
— | — | 3,921 | — | — |
Maintenance | — | — | Â | — | 1,425 |
Software | — | — | 6,197 | — | Â |
Total | — | — | 47,510 | — | 17,751 |
The Potential for the IT industry |
— | — | 65,260 | — | Â |
Source: DQ Estimates, Indiastat.com |
|||||
WHAT’S BEHIND THE POT OF GOLD? At very conservative estimates, we decided on one PC in every two Indian villages. The value of each kiosk–boasting a multimedia PC, scanner, UPS, Webcam and printer–would be Rs 55,000 (current estimates range from Rs 60,000 to Rs 70,000). The current earning of a kiosk owner is taken at Rs 3,500 at the village level and between Rs 3,500 and Rs 4,500 in towns and districts. Also, we have accounted for domestic software and local language-based solutions, which will be increasingly in demand as the market size grows |
Mohan Patedar, a soyabean farmer from Tirla, Dhar, sold his
last crop at the district market for Rs 700 per quintal. This was after checking
the rates in different markets on the Internet at his village cyber kiosk. A few
years ago, Patedar used to endure a 30-minute backbreaking journey to the
wholesale market in Dhar just to find out the crop prices. Besides, the
middleman who arranged for picking up the crop would charge Rs 50 per quintal as
his commission. Next year, Patedar plans to rent and ferry his crop to Baroda
mandi, more than 300 km, because he will be getting a yield of over Rs 900 per
quintal.
The 10 octroi checkposts on the Gujarat border have been
computerized. The moment a truck enters Gujarat, its weight gets recorded on a
computer and the number-plate of the vehicle is video-graphed. The audiovisual
information is instantly accessible at the central control room in Ahmedabad.
The net result- it is no longer possible for local officials to cut their own
deals and record a lower weight against a bribe. The income from octroi receipts
quadrupled over the past year from $13.95 million in 1998-99 to $58.13 million
in the year 2000. This is not bad considering that the implementation of the
project cost a little under $4.10 million.
Sounds like the India of the future (sigh) or the US of the
present? Well, this is India, right now. Maybe not as rapidly as the telephone
revolution that set of a proliferation of PCOs (public call offices) even in
remote Indian villages, but the beige box too is striding into the Indian
heartland. And as the ‘other India’ rapidly realizes that this swanky
machine is much more than a ‘TV screen and a typewriter’, remarks like
"Is machine ne hamari zindagi badl di (This machine has changed our
lives)" are becoming common across the length and breadth of India.
So, is this another sugary story about bridging the digital
divide? Not really. While reams have been written about philanthropic IT
initiatives posed to change the world, let’s look at the flip side—the
business opportunity that reaching out to the masses would offer.
Look at current state of the domestic Indian IT industry.
Most companies have recorded flat or single digit growth. While this is largely
because of the slowdown, the real problem lies elsewhere–market saturation.
According to an IDC India survey, the existing IT market is strongly dependent
on the contribution of the six major Indian cities and every player is targeting
the same set of customers trying to eat into someone else’s share. The obvious
fallout of this is undercutting. Given the saturation in the market, companies
have no alternative but to turn to the B and C class cities to scout for growth.
The small and mid-sized businesses in the smaller cities typically take longer
to adopt IT, but the IT spending in such markets is likely to go up in future.
Deeper into the forest
But hold on. Let’s look even beyond this market opportunity. The SME
(small and medium-sized enterprises) and SOHO (small office-home office)
segments form a huge market and could be the growth engine of many companies,
but there is scope further ahead. As per the 1991 census, 74% of India’s 846
million-population, is in rural areas. While not disputing the poverty levels in
Indian villages, the fact remains that agricultural development and the virtual
absence of agricultural income tax have led to disposable incomes. Modern modes
of communication and the mobility of jobs have successfully ushered in the
awareness about urban lifestyles into rural homes. Not surprisingly, these
aspirations are reflected in the radically changed consumption patterns in rural
India, an aspect FMCG companies have promptly factored into their overall
marketing strategy.
So, can it be the same for the IT industry? Yes, there is an
opportunity, a HUGE opportunity, that the industry needs to grab.
As NASSCOM president Kiran Karnik says, "Just like the
FMCG companies have realized that there is a great market opportunity in the
rural hinterland, the IT industry too will realize the same." Here’s a
quick look at the current state of IT in the ‘developmental’ segment. This
encompasses not only the rural market, but little explored areas like education
in the urban areas as well.
There has been a pocket of technology deployment primarily in
e-governance related projects like Gramdoot and Gyandoot.
Then there have been experiments in wired villages like Warna.
So how big is the market? India has 5,79,688 villages. We can safely assume that
at least one kiosk is deployed in each village and each kiosk brings in a
monthly revenue of Rs 3,500-4,000. Then, look beyond the corporate market in the
urban jungle. According to data available on Indiastat.com, there are over a
million educational institutes waiting to be tapped. Even if one estimates that
only 50% of these buy an average of seven computers, the demand for PCs would
exceed 3 million units, nearly 150% of the current PC market.
Consider the educational services angle. IYCworld recently
deployed an ASP solution for New Delhi based Venketeshwara College for about Rs
3 lakh per annum. Just think of the opportunity is deploying similar projects in
over a thousand of colleges across the country. The same could go for the
multitude of Residents’ Welfare Associations (RWA’s) in our cities.
Add the cost of automation in ration stores and retail shops
and the figure exceeds more than two or three times the current domestic IT
market. Points out Sandeep Srivastava, CEO, IYCworld, "The potential in the
non corporate segments in the urban market itself is mind boggling. But it is a
tough market to penetrate."
Mind you, we have still not considered the government
spending or the IT potential in the SME/SOHO segments. But before IT’s
mandarins bring out the bubbly, here’s word of caution from Rajiv Mody,
chairman and CEO, Sasken Communication Technologies, "In order to sustain
and scale a solution, one needs to have a clear business model behind it."
Driving Miss D
There is no disputing the fact that the opportunity exists. And who’s
cautiously moving in to have the first mover advantage? Certainly not the big IT
players. The market has primarily been driven by the government carrying out its
mandate of bringing IT to the masses or smaller players out of the sheer need to
move out of the clutter. The need to expand their target market dominated by the
bigger players and the hope of grabbing the pot of gold at the end of the road
has kept these small companies going so far. Besides, this market is still in
its infancy. And it will be a while before the various developmental segments
translate into real business opportunity. These segments need to be nurtured to
actualize their potential. The government, obviously, has to take the lead. So,
if the government does its bit, revs up its IT spend automates its departments,
it will be another major growth story for the IT vendors. But without this
endeavor, the going could be very slow.
|
At the next rung would be the multitude of small local
players along with the NGO sector that would drive the rural folk to use IT
applications. There is already a sprinkling of such endeavors. Companies like
Drishtee, IYCworld, Simputer, nLogue, Midas Communications, Tarahaat, Digital
Partners and MIT Media Labs Asia are spear heading the movement to make a
difference and for some - money as well. Comments Dr. Bishnu Pradhan, Director
Technology Development, of MIT Media Labs Asia, "It gives tremendous
satisfaction to see the positive effect one can have on peoples’ lives."
"We started with three kiosks in Dhar and now have a 132
spread over 14 districts. We broke even a long time ago and have grown 10-fold
in FY 2001-02," says Satyan Mishra, CEO, Drishtee. Another example, nLogue’s
Internet kiosk using the wireless in local loop technology called corDECT cost
about Rs 40,000 compared to the 30,000 rupees for installing a single telephone
line. No wonder, most villages without telephone connectivity and in need of
connecting to the Net are using this technology. These entrepreneurs are proving
that these technologies are sustainable and profitable. Agrees Professor Ashok
Jhunjhunwala, department of electrical engineering, Indian Institute of
Technology, Chennai, "For the time being, this market space is restricted
to small players and entrepreneurs. But the big players will come in
later."
continue...
Finally, it’s also the handful of big non-IT companies,
which are active in this field–from a pure business perspective. ITC’s e-Choupal
connects it to the farmers and is proving to be a good business proposition.
Amul has taken IT to rural India a long time ago. Today, the company is managing
the logistics behind coordinating the collection of over 6 million litres of
milk per day from about 11,000 village cooperative societies throughout Gujarat.
And then storing, processing and producing milk products at the respective 12
District Dairy Unions with the help of introducing technology to the farmers in
Gujarat. Its CEO B M Vyas has on many occasions said, "Amul is not a food
company, it is an IT company in the food business." In saying this, Vyas
has acknowledged that the most efficient way of building links between milk
producers and consumers is through IT innovation. However any attempt at using
IT in the rural areas has to be a coordinated effort between the government, the
industry and villagers. Concurs Midas Communication’s director Shirish Purohit,
"The industry should take the initiative and the government should offer
support with an open mind. And the ‘last mile’ has to be handled by the
local entrepreneurs."
What about major players in the Indian IT/telecom space?
Comments Mody, "It is possible that large business houses wait it out to
see the concept proven by smaller players and enter the market in a big way,
either through acquisitions or through their own setups."
Among the known ones are Gurgaon-based Aksh Optifibre and
Bangalore based Sasken Communication Technologies. Comments Aksh Broadband’s
president, Rajneesh Bhandari, "We think there is revenue in villages but it
will come slowly.
However, much growth will happen out of these areas."
Aksh is connecting 400-gram panchyats in Jaipur and will be providing facilities
like cable TV, multimedia (entertainment), eGovernance and Internet access among
other services. Sasken on the other hand is taking the product route. Says Mody,
"We currently offer three products for consumption in the mass
market."
The opportunity is real and the Dataquest estimates are just
tip of the iceberg. Agrees Karnik, "These is huge scope for newer
applications like using handhelds along with GIS mapping software for village
land records and village mapping and a huge potential for the IT industry.
"
However, the big entrants into this space would have to face
a multitude of hurdles on the way as the market is fragmented and fraught with
risk. India’s literacy rate of close to 45% means that a majority of the
population lacks basic skills required to use English-driven IT applications.
The criticality of providing content in the local language cannot be highlighted
further. There is an urgent need to localize content as well. How long can the
business sustain on pure eGovernance issues? So the content must be customized
to meet the requirement of the target community and should address the issues
pertinent to the community.
Agrees Purohit, "We need to create applications and
content that is locally relevant and addresses the day to day needs of the
target population." For example, the applications should enable farmers to
coordinate with eachother on day to day issues like harvesting of their crops.
If farmers across the community can communicate effectively, each one could
harvest his crop on a different day and the harvest could go to the market in a
sustainable staggered fashion. Imagine the benefits to the farmers, given that
crops are harvested around the same time resulting in a flood in the market and
thus a loss in revenue. Once these issues are tackled in one project, then you
could have opportunity beckoning you elsewhere. Given the demonstrative effect
of positive media coverage, governments are taking this revolution forward.
Agrees Bhandari, "We have got invitation from a couple of other states to
do projects similar to the one in Rajasthan."
India’s dream of becoming a tech powerhouse can be realized
only if her people uses technology. Look at countries like China and Japan. One
cannot imagine them as tech superpowers sans the consumption of technology in
their domestic markets. Tech usage just has to happen in rural India. Forget the
social cause, it’s plain and simple business!
Yograj Varma in New
Delhi
From Small Beginnings are Made...
Drishtee.com
Can a small player survive in the highly ‘apprehension’ driven rural
technology market? Well, two-year-old Drishtee has not only survived the market
but also has made reasonable profit by facilitating a platform and servicing the
rural and semi-urban population. The company uses a tiered franchise and
partnership model and assists its clients with services including access to
government programs and benefits, market related information, and private
information exchanges and transactions. Drishtee’s business model is driven by
village entrepreneurs suitably trained to handle user-friendly software. While
the unit revenue earned by this kiosk owner is a few rupees per transaction, the
volume of the operations and an intrinsic demand enable viability very early in
the operation. Given the current mindset, Drishtee needs a minimum size of 800
families as a prerequisite for viability of its kiosk. A small fraction of the
combined total revenue of such centers is enough to interest a local businessman
to act as a channel partner and invest in covering the operational cost. This
partner performs the role of a franchisee and adds value in scouting for kiosk
owners, developing relations with the government at the district level, and
maintaining the entire network of operations within the district. Also, Drishtee
ventures into areas where it has been invited by the government as the
government lends credibility and helps the channel partner’s operations by
assuring speedy processing of applications and grievances at the block and
district levels. Users save immensely on the cost of traveling and the time
spent for getting these services. Current services offered include private
services like Village Haat, a bus time table, avedan patra (requisition letter)
and government services like land record, public grievances, online applications
and issuing driving licenses among others.
IT impact: over 132 kiosk deployed and an expansion plan of over Rs 400 crore
(55000 kiosks) over the next few years.
Service revenue to Drishtee and franchisee: Rs4000 per kiosk.
ITC
e-Choupal (http://www.itccorporate.com/sets/choupal_frameset.htm
)
Tobacco and agriculture produce major ITC conceived e-Choupal to tackle the
challenges posed by the unique features of Indian agriculture, characterized by
fragmented farms, weak infrastructure and the involvement of numerous
intermediaries, among others. While problems like lack of infrastructure,
including power supply, telecom connectivity and bandwidth remain, e-Choupal has
demonstrated how IT initiatives can help the farmers and the company as well.
The farmers, called sanchalaks can access ready information in their local
language on the weather and market prices, disseminate knowledge on scientific
farm practices and risk management, facilitate the sale of farm inputs and
purchase farm produce from the farmers’ doorsteps.
It’s a win-win situation for the farmers and ITC. The farmers can transact
with the company directly and strike orders on the net. In the process, the
farmers save about Rs 250-500 per tonne, depending on the location from the
collection center. ITC gains in terms of assured supply and savings of over Rs
200 per tonne by avoiding transportation of the crop from the Mandi to the
collection center and other intermediaries costs in the supply chain. Net impact
— business over Rs 100 crore transacted so far and the company plans to extend
the initiative to 14 other states across the country over the next few years.
IT impact: over 700 kiosk deployed and a budget of over Rs 150 crore for the
expansion.
E-commerce: Over Rs100 crore
Other players: Nagarjuna and E I D Parry
IYCworld
Another ‘small’ two year old player IYCworld (www.iycworld.com
) has
already broken even and is betting heavily on the non-corporate and government
segment. Its rationale:
- These organizations command high numbers and reach as well as specific
loyalties of each of their members/ stakeholders - These are mainly social institutions and their value proposition is mostly
irreplaceable. ‘Pay-for-use’ as a business model is not only safe but
also big even with micro payments.. - In the times of major technological discontinuities, when infrastructural
bottlenecks and technological issues are many, these customers are far more
co-operative. - The death/churn rate in these organizations is low. Once they become
customers, reasonably serviced, they can remain customers for decades! - In spite of offering customized solutions, the difference between any two
in a given category is low. These sectors offer almost infinite scalability. - Rapid change is not the norm in these sectors.
- The intensity of usage being lower, the bandwidth costs are low despite
volumes being very high. - And these two sectors actually constitute over 80% of the economy!